We are fast approaching the end of Financial Year and as always, there are a number of significant changes occurring to superannuation legislation effective 1 July 2021.
Below we outline these major changes:
The Government announced in late May 2021 the temporary reduction in minimum drawdown rates for super pensions will be extended for the 2021/22 Financial Year.
The reduction applies to account-based and market-linked pensions. This also applies to the transition to retirement pensions. There is no change to the maximum drawdown limit.
The below table summarises the reduced annual minimum pension payment factors for account-based pensions.
|
Age on 1 July |
Reduced minimum for 2021/22 |
Minimum for 2022/2023 and future years |
|
Under 65 |
2% |
4% |
|
65 to 74 |
2.5% |
5% |
|
75 to 79 |
3% |
6% |
|
80 to 84 |
3.5% |
7% |
|
85 to 89 |
4.5% |
9% |
|
90 to 94 |
5.5% |
11% |
|
95 or older |
7% |
14% |
The SG contribution rate increases from 9.5% to 10% from 1 July 2021. The concessional contribution (CC) cap also increases to $27,500 (or maybe higher if the client can use catch-up contributions). Most employees will receive additional superannuation contributions. An exception is employees who are paid mandated employer contributions at a rate at or above 10% already, who will see no increase.
Small business owners should review their systems to ensure that they are meeting their obligations to their employees based on the new rate.
Legislation has finally passed to increase the eligibility age for the Non-Concessional Cap bring-forward rule. Clients aged less than 67 (previously 65) at the start of a financial year may now be able to trigger the bring-forward rule in 2020/21 or a future financial year.
There is no change to the other eligibility rules, such as the total super balance (TSB) requirements, which also limits the ability to make non-concessional contributions (NCCs).
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